What are the Tax Benefits of Loan Against Property?

Loan against property is a loan offered against a property that is already under your possession. The loan is a secured loan where the property of the borrower is taken as the collateral. LAP can be taken for business use as well as for personal requirements. The value of your property decides the amount of potential loan you can get approved. The borrower gets the flexible loan against property tenure which ranges from 3-20 years if the borrower is salaried and 3-18 years if the borrower is self-employed.

Loan against property tax benefits:

As per section 24 (b) and 80C, there is no tax exemption if the borrower has mortgaged a home to get the loan against property. Loan against a property makes the borrower eligible to claim the tax benefits only. Here are some offered loan against property tax benefits one can achieve:-

1. If the borrower uses the loan amount for business purposes then he can claim the processing and document charges and interest paid as per section 37
   (1). Business purposes could include buying more machinery, investing in training, and more.
   
2. If an applicant uses the loan against property for purchasing any property then he is eligible for the tax deductions and the maximum deduction an applicant can claim is 2 lakh, as per the section 24 (b) of the income tax act.

However, if the borrower uses the loan amount for personal expenses such as children’s education, wedding expenses, travel, etc. then she/he is not eligible for any tax exemptions.

Reference Read: Loan Against Property Tax Benefits At A Glance